06/21/2018 Meg Slindee

Job Market Diversification Correlates with Productivity, Education Levels, and Real Estate Activity

In nature, more biodiversity means more life. In a healthy ecosystem, all species have a role and those roles support each other, whether directly or indirectly. Coral reefs are the perfect example. Occupying less than one percent of the ocean floor, coral reefs are home to more than 25 percent of marine life. This immense biodiversity helps the space thrive under good conditions and withstand any challenging conditions.

When you look at regional economies, diversification is similarly important. When there are many types of jobs in various industries and at different companies, it allows economies to thrive. If something bad were to happen in just one of those variables, the economy would likely be more resilient because of the diversity it enjoys.

Consider the LinkUp Job Market Diversification Report, which measures diversity by company, industry and job type. In the most recent release, data shows how diversification is correlated with unemployment rates, with high-scoring large markets showing lower unemployment generally.

“The LinkUp Job Market Diversification Report is highly correlated to unemployment rate in the large market MSAs in that MSAs with the highest scores are among the MSAs with the lowest unemployment rates. San Francisco, for example, has the 4th highest diversification score and has the 2nd lowest unemployment rate among large market MSAs.” — LinkUp Job Market Diversification Report: Q1 2018.

 

Job market diversification effects

A diverse job market has a far-reaching impact. Real estate researchers, data analysts and brokers use job market data to draw insights for investors about given markets. The LinkUp data analysis team wanted to see whether our Job Market Diversification scores correlated with other metrics in the real estate market and found high correlations between diversification and the population’s education level, “Real Estate” market ranking from WalletHub, and Gross Metropolitan Product (GMP) Growth.

 

GMP growth

Gross Metropolitan Product is a monetary measure of all final goods and services produced within a metropolitan statistical area (MSA) in a given time period. The real estate market data in Cushman & Wakefield’s “Location Lens: U.S. Overview” report provides a measure of annual GMP growth rates for 25 cities. When compared with LinkUp’s Job Market Diversification Score, we found that in general, a higher score meant more GMP growth.

Higher education

Cushman & Wakefield’s report also provides the percentage of each MSA’s population that holds a bachelor’s degree or higher. This metric shows a very strong correlation with LinkUp job market diversification scores. Populations with a larger percentage of college graduates indicate that the market has greater job diversification. More analysis is needed to discern why, but we suspect more diversified markets attract more college graduates.

Real estate health

Credit reporting and financial-wellness provider WalletHub produced the 2018 Best Places to Be a Real Estate Agent report that compares 170 U.S. cities across 18 indicators of a healthy real estate environment. Each city’s composite score is calculated on its respective scores for real estate market health and job opportunity and competition. Unsurprisingly, a look at the same cities from the previous two metrics compared with their Job Market Diversification Score revealed another strong correlation.

In conclusion, it’s safe to say that LinkUp’s Job Market Diversification Score is highly correlated with a market’s education levels and real estate sector health. Just as biodiverse ecosystems thrive, so, too, do well-diversified job markets.

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